Study highlights low minimum wage for tipped employees

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In West Virginia and many other states, the minimum wage for all workers is $7.25 an hour, but it is significantly less for tipped workers. Many restaurant owners only pay their workers a wage of $2.13 an hour, assuming tips will enable them to reach the minimum hourly wage.

Some waitresses and waiters in West Virginia believe that is unfair, especially when some employers have improper tip-sharing arrangements, which helps them pay other workers who do not get tips.

Some employers have also kept portions of those tips themselves, according to a U.S. Department of Labor news release in May.

Federal officials ordered Black Bear Burritos in Morgantown to pay 105 workers more than $200,000 in back wages.

Last Thursday, the Economic Policy Institute, based in Washington, D.C., released a new study by Sylvia A. Allegretto and David Cooper — “Twenty-Three Years and Still Waiting for Change: Why It’s Time to Give Tipped Workers the Regular Minimum Wage.”

Ted Boettner, director of the West Virginia Center on Budget and Policy, said, “While the West Virginia Legislature took a good first step this year modestly increasing the tipped minimum wage, much more needs to be done to help working families make ends meet. Far too many waiters and other tipped workers are not getting an honest day’s pay for an honest day’s work.”

The hourly minimum wage for workers getting tips will increase from $2.13 today to $2.40 in 2015 and $2.63 in 2016 under the new law.

When the legislation takes full in effect in 2016, the Center on Budget and Policy predicts it will increase annual employer wages for tipped workers by $789.

Rep. Nick J. Rahall, D-W.Va, said, “Struggling to keep their heads above water, many tipped employees work backbreaking hours. Most are women over the age of 25 with no health benefits.

“Raising the minimum wage, providing a fair wage, would help lift families out of poverty and strengthen the economy — goals I strongly support. We ought to use every tool in our arsenal to help working families get ahead. Hard working West Virginians do not deserve to live in poverty.”

The proposed federal Fair Minimum Wage Act of 2014, known as the Harkin-Miller bill, would increase federal minimum wages to $10.10 an hour, up from $7.25 an hour today.

The legislation would also reconnect how the minimum wage for tipped workers is calculated, raising minimum wages for those workers to 70 percent of the regular minimum wage — which would be $7.07 an hour for tipped workers.

Elaine Harris, international representative for the Communication Workers of America in West Virginia, said, “Whenever we go out to eat, I give waiters good tips. I see some people that don’t leave a tip. That is a big inequity.

“Whenever their pay is raised,” Harris added, “that puts more spending money to people who will spend it themselves and put it back into out economy.”

The new EPI study provides many key facts relevant to debates about raising wages, especially for workers who depend heavily on tips. They include:

| The sub-minimum wage for tipped workers has been $2.13 an hour since 1991. In 1996, that wage was “decoupled” from the regular federal minimum wage. In 1996, the tipped minimum wage was 50 percent of the regular minimum wage. Today it has reached a record low of 29.4 percent.

| “Customers’ tips pay the $5.12 difference between the federal tipped minimum wage and the federal regular minimum wage. Thus, customers provide a subsidy to employers of tipped workers worth more than twice the wage these employers are required to pay their tipped staff.”

| Between 1990 and 2013, private sector employment in the country increased by 24 percent. Employment at full-service restaurants rose by 86 percent, “Illustrating why it is increasingly important to raise wages for these workers.”

| Today, women represent 66.6 percent of all tipped workers. Tipped workers are disproportionately young, but the majority are at least 25. One in four tipped workers today is over 40.

| The median wage for tipped workers is $10.22 an hour, compared to $16.48 for all workers across the country.

| Tipped workers receive lower benefits than other workers, particularly in health insurance and retirement benefits, as well as paid leave for sick days, holidays and vacation time.

A handful of states already require employers to pay their tipped workers the full minimum wage – Alaska, California, Oregon, Minnesota, Montana, Nevada and Washington.

A poll conducted last month by the American Sustainable Business Council and Business for a Fair Minimum Wage found that 61 percent of small business owners support gradually increasing the federal minimum wage from $7.25 an hour to $10.10 an hour.

After the minimum wage reaches $10.10 an hour, a majority of respondents support adjusting minimum wages annually to keep up with increased costs of living.

Small business owners who participated in the poll backed raising the minimum wage to $10.10 an hour by majorities of 67 percent in Northeast, 61 percent in the Midwest, 60 percent in the West and 58 percent in the South.

Business owners participating in the poll, whose results were released earlier this month, included 43 percent identifying themselves as Republican, 28 percent as Democrat and 19 percent as independent.

Today, the United States has about 4.3 million tipped workers, the EPI study states. Of these, about 2.5 million work as waiters or bartenders.

Tipped workers also have less education: 36.5 percent of all workers do not have more than high school education, compared to 48.2 percent of tipped workers. Tipped workers are also less likely to work full time.

The EPI study also reported: “35.5 percent of non-tipped workers and their families rely on public benefits, compared with 46.0 percent … of tipped workers.”

The EPI study concludes, “Often discussion and action surrounding the minimum wage ignores or excludes tipped workers and the sub-minimum wages they receive. Yet this is a growing occupational sector, and effective policy could transform the low-wage, high-poverty jobs…into better quality jobs.”